The best credit cards for college students hold two major advantages over other sources of funding used to pay for college expenses:
- Student credit cards help students establish credit.
- Student credit cards teach valuable lessons on managing personal finances.
What happens if you don’t establish any sort of credit at a young age? Well, imagine having zero credit history. Renting an apartment, buying a car, or even getting a normal rewards credit card would be nearly impossible.
Learning how to properly use student credit cards is a great first step to becoming fiscally responsible and financially independent.
I aimed to accomplish two main goals in this guide:
- Research and analyze the best credit cards for students and make recommendations
- Educate students about the proper use of credit cards and how to avoid major mistakes
The Simple Dollar’s Top Picks
The Discover it® for Students is a card that stands out from the rest of the pack. This is the best student credit card to teach financial responsibility.
Best Student Credit Card for Financial Responsibility
Earn 5% Cash Back
You earn 5% cash back on categories that change throughout the year. The only other student credit card that offers 5% cash back is the Citi® Dividend Platinum Select® Visa® Card For College Students. However, that card is missing many of the top features the Discover it® for Students has to offer.
Discover offers one of the best cash back credit cards on the market and this student card is virtually no different. The 5% cash back categories for the Discover it® card include Restaurants & Movies (January – March), Home Improvement Stores and More (April – June), Summer Break deals (July – September), and Holiday Shopping (October – December).
7 Reasons to Get Discover it®
One of the major benefits of owning a student credit card is understanding your own credit. Of all the best credit cards for students, no card is better than this card. Every cardholder receives a free FICO® Credit Score on every monthly statement to keep an eye on their score. You can read more about understanding your FICO score here.
Also, with the Discover it® for Students card, you can log in to your online account to find charts illustrating the types of items purchased and how much you spend on average. It’s a nice feature to help you stay aware of what’s going on in your account, visually.
Great Customer Service
Discover offers 24/7 U.S.-based customer service so you can get personalized help at any time. Many past and present cardholders have commented on how great the customer service and support is from Discover. It’s an important aspect of a student credit card that shouldn’t be overlooked, particularly because young adolescents may need more assistance understanding the various aspects of using their cards.
Compared to some of the other best student credit cards, the Discover it® for Students is by far the most forgiving. First, paying late won’t raise your APR. The only other top student card that has that claim is the U.S. Bank College Visa® Card. Second, you won’t be charged a late fee on your first late payment, which is something unique to the Discover it® for Students card.
Additionally, the Purchase Intro APR is 0% for six-plus months so the student has ample time to “practice” responsible card use, making sure they pay off the full balance on time without paying interest. Students should get in the habit of never carrying a balance, but mistakes happen. Having the six months of 0% interest in addition to the forgiving terms should give the cardholder plenty of time to adjust to owning a credit card.
No Additional Fees or Liability
The card is also great for students who plan to travel abroad. There are no foreign transaction fees, which can sometimes be higher than 3%. There’s also no overlimit fee, meaning you won’t be charged if you go beyond your credit limit by mistake.
Discover also offers $0 fraud liability so you won’t be responsible for any fraudulent transactions made on the account. There’s no need to worry if the card is stolen or lost (this happens sometimes to college students).
Just about any student credit card won’t have an annual fee, but it’s worth pointing out the Discover it® for Students doesn’t have one either.
College students haven’t had the time to build a robust credit score, so they need a way to secure a credit card. The card accepts credit scores in the 600 range if you provide proof of income; otherwise, a parent can co-sign. The average credit score approved for the card is 672 and the lowest credit score approved for the card is 629 (as of January 2014), indicating it’s not too difficult to get accepted.
Based on the customer reviews on Discover.com, students who use this card are thrilled with it. Again, many cardholders rave about the excellent customer service. Others describe how much they’ve learned. One cardholder noted, “This was my first credit card, and it has taught me so much. They start you out with a reasonable limit and the benefits are awesome.”
Another Discover Option
Earn 2% Cash Back
You earn 2% cash back automatically at restaurants and gas stations every quarter on up to $1,000. This is a good option for students who don’t spend a lot but a good amount of purchases are on eating out or filling up your tank. It’s good for piece of mind to know that you’re getting double the rewards back without having to look at rotating categories.
Pay Fewer Fees
Discover it® chrome for Students offers no annual fee, no late fee on your first late payment, no overlimit fee, and no foreign transaction fee*. This would be a great option if you plan on studying abroad or travelling!
Also, with the Discover it® chrome for Students card, you pay 0% intro APR on purchases for 6 months and your APR won’t go up if you pay late. Even though good payment practices should be established, this error forgiveness is helpful in the event that the cardholder acts irresponsibly. Plus, having the six months will allow you to adjust to owning a credit card, if this is your first card.
Discover it® Advantages
Like the Discover it® for Students card, this card provides a free FICO® Credit Score online and on every monthly statement so you can track your score’s progress and better understand your own credit. You can read more about understanding your FICO score here.
The Discover it® chrome for Students card also has free text alerts that can remind you when your payment is due and a free mobile app that helps you stay on top of your account anywhere and anytime. In addition, Discover offers 24/7 U.S.-based customer service so you can speak to someone and receive the attention you need at any time. This is a great feature for students, especially if they are new credit card holders and may require additional help.
This card is also easily approved as provide proof of income is provided or a parent co-signs.
Discover it® for Students vs. Discover it® chrome for Students
The only real difference between the Discover it® for Students and the Discover it® chrome for Students is that the Discover it® for Students gives 5% cash back on rotating categories on up to $1,500, whereas the Discover it® chrome for Students gives 2% cash back at restaurants and gas stations on up to $1,000. All the other benefits and fees are the same.
The choice between the two cards really comes down to where you’re primarily spending your money. The Discover it® for Students card will give you cash back on rotating categories each quarter. If you are likely to spend money at varying establishments throughout the year and will maximize your rewards, then this card is a better option. On the other hand, if you consistently spend money on eating out and paying for gas throughout the year, the Discover it® chrome for Students may be a better bet, even though the cash back percentage and spending limit is lower.
Best Student Credit Card to Save for College
While researching student cards, I came across the Upromise World MasterCard® that uses points to help parents save for their children’s college education. The points can be directed into savings accounts or investment vehicles.
The Upromise World MasterCard® combines elements of money management, building credit together, and long-term savings together into one package.
How It Works
The Upromise World MasterCard® lets you rack up generous rewards points on all sorts of everyday purchases, including dining, gas, and movie theaters. With no listed rewards caps, this is one of the better rewards programs you’ll find with any credit card let alone a student credit card.
Your points get deposited in your Upromise account. From there, you can direct them to a Upromise savings account or a 529 college savings plan for college-related expenses.
Spend to Accrue Cash Rewards
Get in the habit of using the card for all of your everyday purchases and paying off the balance. The rewards on this card are almost unbelievable for a student credit card, but you’ll have to plan in advance to maximize the rewards. Purchases from certain predetermined retailers yield more points than others.
For instance, Upromise partners with over 850 online retailers like Best Buy and Macy’s. Before you start spending at the partner websites, you’ll want to check out the Upromise website, which lists every partner, their rewards rate, and any coupons or deals they’re running to get max rewards.
Below are some of the rewards rates for retailers that are partnered with the Upromise World MasterCard®:
Upromise also partners with over 10,000 restaurants. Not all restaurants you visit will earn monster rewards, but Upromise has a nifty tool to find restaurant partners near you.
Here’s a quick search I did for restaurants in Chicago for the Upromise World MasterCard®:
Save Cash Rewards and Grow Your Money
Once you get the hang of maxing out your rewards points and spending strategically, you’re well on your way to saving more for your child’s education. The next important decision you need to make is how you want to direct your cash back for college savings.
The money you earn from your everyday spending with Upromise partners goes directly into your Upromise account. From there, you can choose to invest your earnings in a high-yield savings account or tax-deferred 529 plan. I am not a financial advisor, so I won’t recommend one course of action over another, but those two options do exist.
Use Cash Rewards for Higher Education Expenses
As the money grows in your account and your child chooses a school, the time will come to use the cash rewards you’ve accumulated for college expenses. There are rules that govern how the money can be used from 529 plans, so consult with a financial professional. Generally, the money can be used for most college-related expenses.
There are additional options where the money can be used to pay down student debt, and it’s also possible to simply request a check that can be used for college or other expenses.
Get Friends and Family to Rack Up Points
Let’s face it, college is just plain expensive these days. To help out, one of the coolest features of this card is that you can get the card for friends and family so they, too, can rack up points for your child’s education. This is perfect for grandparents or a godparent who wants to help out with school expenses. Their points can be directed into your child’s education account. Talk about a creative way to help out!
All around, this is the best credit card to help families save for higher education. You’ll have to do a bit more work to max out your points, but with the super-high rewards rates you can’t find anywhere else and with tons of great partners, you can’t go wrong. Having the ability to get friends and family in on the savings plan is a huge extra bonus.
The Rest of the Best Credit Cards for College Students
While I don’t recommend getting any of the cards I mention here over the Upromise World MasterCard® or the Discover it® for Students, I felt it was only fair to present additional options. I’ll also explain why these cards are not the best.
Citi® Dividend Platinum Select® Visa® Card for College Students
Why It’s Not the Best
- Paying late your first time will cost you a fee and raise your APR
- No credit reporting
- Foreign transaction fee
Citi Forward® Card for College Students
Why It’s Not the Best
- Rewards exists but they’re below average
- No credit reporting
Journey Student Rewards from Capital One®
Why It’s Not the Best
- No forgiveness for late payments
- No credit reporting
- Only 1% cash back, but there is a 25% monthly bonus
Research the 11 Best Credit Cards for Students
Listed below, you’ll find a directory of the most popular student credit cards on the market. I used this directory as a starting point for my research and analysis.
The student credit cards directory is a custom directory that highlights the most important features for student cards and displays important information about each card. The directory is maintained and updated on a weekly basis to ensure it is always current.
Student Credit Cards Directory
The student credit card directory lists many student credit cards and the key information for each card. In order to rank and value each of these cards, certain features were weighted based on the overall importance to the prospective cardholder.
Sort, filter, or search for what matters most to find the best student credit card for you.
The most heavily weighted (and most important) elements of a student credit card are rewards, error forgiveness, and support for financial learning. There are other factors that contribute to the rating for each card. This rating is based on what I deemed to be the most important factors for deciding between the best student credit cards.
To develop an overall rating for each student card, we used the features and corresponding data from the directory above. To better describe the data and overall rating, an explanation of each component is included below.
Rewards Rate refers to the actual rate at which you can earn rewards using the student card. The very best student credit cards offer up to 5% on select categories. The “base” rate is often 1%, but some student cards do not offer rewards at all. Some of the best cards offer rotating categories that enable you to earn 5% rewards points on a variety of common purchases each quarter. Other top cards will give you high percentages in a variety of categories with no caps on rewards.
Intro APR is another important factor to consider when rating student credit cards because it gives students the time necessary to pay off an initial balance. However, introductory APRs should be used wisely and only out of necessity since it’s not a good idea to accumulate a large balance and hope to pay it off later.
The top student credit cards will offer 0% intro APR periods between six months and 12 months. The Upromise World MasterCard® has the highest 0% intro APR period of the best student credit cards at 12 months.
Think of error forgiveness as training wheels for your credit card. Error Forgiveness encompasses certain features some credit card companies provide to give students a break if they pay late. This is very useful to have when you’re learning the ins and outs of credit cards. Late payments can ding your credit report, increase your APR, and cost you a bunch of cash in fees — up to $40 for each late payment.
Error Forgiveness provisions aim to cut the student a break. Some companies don’t charge a late fee on the first late payment while other companies don’t let the late payment affect the APR. It’s a feature that most parents would appreciate.
Financial Learning Support
Financial Learning Support refers to supplemental materials or software that help a student learn about important financial concepts. For instance, the best cards have spending analytics full of charts and graphs so you can track, visualize, and learn from your spending data. You can see the types of items you buy most, in what categories you are a high spender, and how much you spend on average each month. This is a critical area where the top student credit cards add a ton of value.
Since one of the main reasons to own a student credit card is to start building your credit history, several of the good student cards provide you with your credit score or other ways you can track your credit history.
Student Credit Cards 101
For parents and students, the choice to get a credit card is not always clear. The credit card industry gets a lot of negative press for predatory practices and charging very high interest rates. On the other side of the coin is the opportunity credit cards pose for young adults: to learn important concepts in personal finance they can use for the rest of their lives.
More than any other financial product, a credit card can teach a student about three important concepts in personal finance:
- Cash flow
- Importance of credit history
Student credit cards provide an excellent way for young students to begin the credit establishment process. The best student credit cards are designed specifically with students in mind in comparison to more general rewards credit cards targeted more at working adults with higher incomes and spending habits. Student cards generally come with relatively low lines of credit and often require a co-signer, but offer innovative services to help students learn about personal finance.
Similar to general rewards cards, student cards also provide rewards for everyday purchases, including things like gas and groceries. These rewards can be redeemed for cash back, gift cards, music, electronics, and other types of merchandise. In addition, these credit cards can include benefits like travel insurance, roadside assistance, fraud protection, and emergency support.
Cash vs. Credit
People often think credit cards are equivalent to money, but that is definitely not the case. Money is all the cash, coins, banknotes, and balances you actually have on deposit at a bank. When you look online and see a number in your bank account, that is the amount of money you actually own which you can withdraw — with no strings attached. If you buy lunch at a restaurant with money using your debit card, the cost is immediately taken out of your bank account and given to the restaurant.
A credit card is actually a short-term loan. Another word for a loan is debt. When you purchase lunch at a restaurant with a credit card, the credit card company pays the restaurant right away on your behalf, then the company gives you 30 days (customarily) to pay them back. You are legally bound to pay that loan back.
Unlike money, credit debt requires you to qualify. Under the Credit Card Act of 2009, students between ages 18-21 can qualify for a credit card if one of two things happen:
- A parent, guardian, spouse, or another adult is willing to co-sign
- You submit proof of income and financial history proving a full-time income (or even a part-time income that’s sufficient enough to pay the balance each month).
Most loans charge interest, but if a credit card is used properly, it can be an interest-free loan. In fact, through rewards accumulation, you can actually be “paid” to use this loan feature.
Student Credit Cards Teach Financial Concepts
Financial Concept #1: Using a credit card to manage cash flow
Being able to match up your income and expenses so there are no shortfalls is called managing cash flow. Imagine your bank account as a bath tub. Think about the dollars that you earn as flowing into your bath tub through the spout, and the dollars that you spend as flowing down the drain and out the tub. In order to keep enough water in the tub, you can’t have a situation where the amount of water drained from the tub is greater than the amount of water coming into the tub.
Now imagine you have $0 in your tub and you need to buy a $5 sandwich today for lunch, but you won’t get paid from your employer until Friday. How do you make this work? You can’t buy the sandwich with money (unless you borrow from a friend or family). However, a credit card can help you manage this imbalance in cash flow by paying for your sandwich today, and letting you use money to pay the credit card company 30 days from now — when you have money in your tub.
Financial Concept #2: A credit card is debt
Borrowing money can be good and bad. Student loans help pay for school when you don’t have the money in your bank account to pay now, which is a good thing. You then pay those loans off over time when you have a job and steady income. While credit cards can be a great way to make purchases easily and manage short-term cash flow, they’re also loans which are a form of debt.
Too much debt isn’t good because it will cost you more and more to pay the money back in the future, and you are legally obligated to pay off your loans. If you owe $1,000 on your credit card statement and choose not to pay off the balance, you will start to accumulate interest on that $1,000.
There is currently no maximum rate a credit card issuer can charge, but it is common to see rates of 22%. That is an extra $220 added to your balance every year you don’t pay off the card. This cycle becomes harder and harder to get out of as it compounds. Using a credit card responsibly is key.
Financial Concept #3: Credit cards help students build credit history
Financial institutions keep track of all your credit accounts, personal loans, auto loans, and home-loan transactions over the course of your life. They want to know how much you owe and the likelihood that you will pay back your loans. The compilation of this information is called your credit history. From this history, financial institutions create a credit “score” for you, and this score helps determine if they will offer you a loan, such as a home loan or auto loan, and at what interest rate.
Having a good credit history is important. Not having any credit history is a negative because the lender will have no idea if you can responsibly make payments on the loan. Even if you don’t think you will be buying a home or a car for a very long time, it’s still a good idea to start building your credit history as early as possible.
If you need a credit history to get a loan, how do you get a loan to start your credit history? This is the conundrum that plagues many young people who’ve not started to build a credit history. A credit card is really one of the best ways to start because they are relatively easy to obtain, can show responsibility with managing cash flow (Financial Concept #1), and will show a history of making payments (hopefully on time) if you use the card regularly.
How Students Get Into Credit Card Trouble
Young people get into trouble with credit cards in many ways. Even though these mistakes are avoidable, they get made all too often. Understanding how the most frequent credit card blunders occur is the key to avoiding them.
Mistake #1: Overspending
Of the many ways young people get into trouble with credit cards, the biggest is by overspending. Buying something just because you can is never a good idea. Even though a credit card is different than cash, thinking of them as the same is helpful. What I mean by this is that I never buy something on a credit card that I can’t pay for with cash either immediately or at least before my credit card’s grace period is over.
Mistake #2: Spending just to earn more rewards
This is really just a sub-mistake of overspending. Many credit cards offer the ability to earn rewards points that can be redeemed for merchandise, cash back, or travel. This feature is tempting to maximize, but the reality is if you can’t afford the purchases, no amount of rewards will help you pay back the credit card company.
Mistake #3: Making only minimum payments
The only payment a credit card company requires you to make each month is what’s called a minimum payment, and it’s usually so small that you would never end up paying off your balance if that’s all you paid. True, making the minimum payment on time will keep your account open.
However, you will enter the interest spiral of death by incurring hefty interest charges on your remaining balance. In all likelihood, the added interest will be more than your minimum required payment, so the balance that you owe will continue to rise and rise until you can’t pay it off. To avoid interest charges, pay your statement balance in full every month.
Mistake #4: Not paying your bill on time
If you pay your bill late, in some cases even minutes late, you will most likely be charged a late fee that can be as much as $40!
Late payments can also start the interest clock on your unpaid balance, costing you more money. But remember, the main reason for student cards is to build a credit history.
If you make late payments, you’re hurting your credit score and you’re also missing out on the opportunity to build your credit, which is a big swing in the wrong direction.
Mistake #5: Using convenience checks or other cash advance features
When you use your credit card at an ATM for a purchase at a store and receive cash back, or when you use convenience checks, you are triggering the cash advance feature of your card. Interest rates for cash advances are generally higher and usually start accumulating immediately. Many people don’t know this and are surprised to see large fees in their statements.
Convenience checks are often included in mailings with your statement. You can use the checks to write a check drawn on your credit card account. This makes certain purchases very convenient. The downside is that these checks are often plagued by the same high interest rates and also typically come with a 3-4% fee on the amount borrowed. All these fees add up and cost you money.
Using a Credit Card the Right Way
Starting small and taking it slow are keys to getting the most out of the best student credit cards. It’s like learning anything new. Take your time and make sure you understand your rights and obligations.
Start small with one card and a low limit
The number one mistake people make with credit cards is overspending. To avoid this, students new to credit cards should open only one card and ask for the lowest limit within reason.
Remember, the idea is to build your credit history and learn about how to properly use credit cards in the future when you’ll have access to higher limits and better benefits. I have seen credit card limits as low as $300, although most banks set the limit at $500. Once you are comfortable, you can request an increased limit, but you will most likely need to talk directly to the credit card company.
Make small everyday purchases, not extra purchases to get rewards
Don’t change your spending habits just because you have a credit card. Get used to using the card for your everyday purchases and see how you can earn points on them (if you have a card that earns rewards).
Understand your spending by analyzing the statement
After a month of putting your everyday purchases on your new student credit card, you’ll be able to view how you spend money and understand your cash flow much better by analyzing your statement. You’ll gain insights into how you spend money, find where you can cut, and discover where you can earn more rewards.
You’ll also understand key concepts, like the difference between your current balance, minimum payment, and last month’s balance. Last month’s balance is what you need to pay every month in full by the due date to avoid interest charges.
See the graphic below:
Pay off your balance each month
When we say “pay off your balance,” it means you need to pay the full amount you charged on your balance in the last statement by the due date. Paying this amount by the due date is what helps you avoid entering the interest spiral of death.
By following all these steps, you will be able to use your new student credit card to effectively manage cash flow and earn points for your everyday spending while building a solid credit history for the future. The best part is, if you avoid all of the mistakes above, you can do all of this for free.
Student Credit Card Glossary
For those new to credit cards, it can take some time to understand all the terms, conditions, rates, and fees associated with card ownership. Listed below are some of the common terms used by credit card companies that can help new cardholders better understand credit and make more informed decisions.
It may take a little time for these concepts to sink in, but the extra effort can help new student cardholders avoid unnecessary mistakes and successfully establish a solid credit score.
Annual Fee: The annual fee is the charge for using the credit card that is applied every year. Not all credit cards will have an annual fee and, fortunately, none of the top student credit cards charge an annual fee.
Annual Percentage Rate: The Annual Percentage Rate (commonly referred to as APR) is the rate at which interest will accumulate if the credit card balance is not paid off each month. The APR is usually determined by the credit of the applicant and the current Prime Rate. The APR on student cards generally ranges from 12.99% – 23.99%. The most important thing to know is that a low APR is better than a high APR.
Introductory APR: Some credit cards will offer an introductory APR that is lower than the standard APR. In many cases, credit cards will offer a 0% introductory rate for a specified period at the beginning of card ownership. For example, two of the top student credit cards have a 0% introductory rate for the first seven months of card ownership. This means that interest will not be accumulating on any credit balances for the first seven months of owning the card. After that seven months is up, the standard APR will kick in.
Cash Advance Fee: The cash advance fee is a charge associated with getting cash from the credit card or taking out a loan on the line of credit. The cash advance fee for the top student credit cards is $10 or 5% per transaction.
Cash Advance Rate: When a credit card is used to make normal purchases like gas or groceries, the standard APR will apply. However, when a cash advance is requested, a different interest rate will be applied. The cash advance APR on many credit cards for students is roughly 25%. Cash advances are a nice convenience, but ideally they will only be used when no other options are available.
Balance Transfer Fee: The balance transfer fee is a charge applied when a credit balance is moved from one credit card to another. This fee is typically either a set dollar amount or a percentage of the amount transferred. The balance transfer fees on the best credit card for students is $5 or 4% of the transaction amount.
Balance Transfer APR: When a balance is transferred to a new credit card, the APR for that transaction is called the balance transfer APR. The balance transfer APR is often higher than the standard APR. With student cards, the balance transfer rate ranges from 12.99% – 23.99%. Some credit cards offer introductory balance-transfer rates that will work just like a standard introductory APR, but it will only be applied to the balance of the transfer.
Late Payment Fee: The late payment fee is the charge applied when a payment is not made before the deadline. These fees can vary, but with student credit cards they can reach as much as $35.
Default Penalty Rate: The default penalty rate is the interest rate applied to a portion of the credit balance (or in some cases the entire balance) when a credit card is in default. Some behaviors that can trigger the default penalty rate include missing a payment, having a payment returned for non-sufficient funds, or exceeding the established credit limit. The default penalty rate is typically the highest interest rate credit card issuers will apply. With student credit cards, the common default penalty rate hovers around 29%.
Overlimit Fee: The overlimit fee is the charge associated with exceeding the established line of credit. Not all credit cards will charge an overlimit fee and, fortunately, none of the top credit cards for students apply these fees.
Foreign Currency Transaction Fee: This is the fee charged when a credit card is used internationally. The foreign currency transaction fee for many cards can be as high as 3% per transaction. This may seem like a small amount, but for students in a study abroad program or heading out on a big trip, these fees can add up and result in an unexpected charge.